2012: A Year in Review — Semiconductor Equipment and Materials Market and Outlook

2012: A Year in Review — Semiconductor
Equipment and Materials Market and Outlook

By
Lara Chamness, senior market analyst manager, SEMI

Semiconductor
Market Trends

While 2012 started out
promising, persistent economic uncertainty plagued the industry, resulting in
decreased bookings, billings, and shipment activity beginning in the summer and
continuing through the end of the year. Semiconductor revenues declined 3
percent according to the SIA, while the new equipment and semiconductor
materials markets contracted 15 percent and 2 percent, respectively.

Worldwide sales of
semiconductor manufacturing equipment totaled $36.9 billion in 2012,
representing a year-over-year decrease of 15 percent and spending on par with
2004 levels. Looking at equipment sales by major equipment category, 2012 saw
contractions in all major categories, except Other Front End (Other Front End
includes Wafer Manufacturing, Mask/Reticle, and Fab Facilities equipment). This
growth was driven specifically by the Mask/Reticle segment, which experienced
its third consecutive record breaking year to reach $1.3 billion. Wafer Processing
equipment contracted 18 percent, while Assembly and Packaging and Test equipment
contracted 8 and 6 percent, respectively.

Due to aggressive
spending by TSMC, Taiwan reclaimed the top spot ($9.5 billion) in equipment
spending from North America, resulting in North America falling to the third
position last year. The South Korea market claimed the second place for the third
year in a row by keeping its investment levels on par with 2011 levels at $8.7
billion. Japan remained in the #4 spot, with $3.4 billion in equipment sales. Equipment
sales to Europe decreased 39 percent in 2012. China and Rest of World both
pulled back on their spending for the second year in a row in 2012. Rest of
World region aggregates Singapore, Malaysia, Philippines, other areas of
Southeast Asia and smaller global markets.

Semiconductor
Equipment Markets – Regional Trends

Comparing equipment
spending trends in 2002 versus 2012, South Korea represents a larger share (up
15 percent) of the total market in 2012 versus 2002, while North America and Japan
saw market shares decline 8 percent and 11 percent, respectively. Europe
accounts for 4 percent less in 2012 than it did in 2002, while share in Taiwan increased
8 percent 2012 compared to 2002. The ROW region, including China, now accounts
for 13 percent of the market compared to 14 percent in 2002.

Semiconductor
Materials

The global semiconductor
materials market, which includes both fab and packaging materials, contracted 2 percent in 2012 totaling $47.1 billion — marking the first decline for the
materials market in three years. Even with the decrease, the semiconductor
materials market has been larger than the new equipment for the past five
years.

Taiwan maintained the
top spot for the second year in a row, followed by Japan, Rest of World, and
South Korea. Driving the materials market in Taiwan are advanced packaging
operations and foundries. While Japan still claims the most fab capacity and
has a tradition in packaging, many companies in Japan have rapidly adopted a
fab lite strategy and have consolidated their fab and packaging plants. Rest of
World, primarily SE Asia, represents the third largest market for materials
given the dominance of packaging in the region.

Looking at the materials
market by wafer fab and packaging materials, packaging materials revenues grew 1
percent while wafer fab materials contracted 3 percent; resulting in the
packaging materials market overtaking the wafer fab materials for the first
time since SEMI has been tracking materials. Wafer fab materials contraction
was driven in a large part to the severe pricing pressure faced by silicon
suppliers, which saw their aggregate average selling price decline 12 percent,
even though the segment shipped record volume of 300 mm wafers that have higher
selling prices.

2012 Regional
Materials Market$47.1 Billion

Outlook

Most analysts predict
mid- single-digit growth for the semiconductor device market for the year. Given
growth expectations for the device market, it is projected that the
semiconductor materials market will increase this year 4 percent, to total
$48.9 billion, setting a new market high for materials. The growth picture for
equipment is hazier; current data and Capex announcements are indicating that
the market will either be flat or slightly down.

2012 was a disappointing
year for many segments in the semiconductor industry as the year started out
promising but activity slowed down during the second half of the year. The
growth outlook for 2013 is mixed, with device and materials revenues
anticipated to increase. However, the equipment segment is expected to contract
or remain flat relative to 2012.

Portions of this article
were derived from the SEMI Worldwide Semiconductor Equipment Market Statistics
(WWSEMS) and the Material Market Data Subscription (MMDS). These reports are
essential business tools for any company keeping track of the semiconductor
equipment and material market. Additional information regarding this report and
other market research reports is available at www.semi.org/marketinfo